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Mortgage banking 2020: Convergent disruption in the credit industry

Banks face tougher regulations, traditional and nontraditional competitors, and digitization challenges.


Banks today face convergent disruption— an array of challenges that include tougher regulations, traditional and nontraditional competitors, and digitization.

To meet these challenges, banks need a next generation core platform capable of supporting three key operational building blocks for competitive advantage by 2020:

  • Optimization and simplification
  • Agility
  • Continuous innovation

And they need to consider new business models— emerging digital lenders, digital hybrids and retail correspondents— or transform themselves to become more digital, truly customer-driven and innovative at the core.

The stakes will be much higher in 2020, no matter which business model is pursued. But for lenders willing to develop a roadmap today, the opportunity exists to become an industry leader by both investing proactively rather than reactively and by embracing and integrating new technologies, channels and strategies.


Today’s lenders are still challenged to rebuild growth, profitability and efficiency following the recent credit crisis.

Multiple disruptive forces are converging on the credit industry at the same time, both from inside and from outside the industry—  including:

  • The digital era is rapidly redefining lender interactions, information flows and data transparency.

  • Ongoing industry convergence is opening the door to new competitors, new ways of doing business and new revenue opportunities.

  • Emerging new entrants are joining the market, competing in innovative ways for customers and profitably serving traditionally unprofitable segments.

  • Customers are more empowered through social media and the prevalence of information, giving them an information edge over lender employees.

  • Rapid consolidation continues. Research indicates 20 to 30 percent of today’s lenders will be gone by the year 2020.

  • A subdued economic outlook is forecast through the next three years as the Federal Reserve Board will leave the targeted federal funds rate at between 0 percent and 0.25 percent in the foreseeable future, and interest rates will rise.

  • Expanded regulations may cost the largest US banks a further $104 billion to resolve mortgage-related legal issues, as they try to put the costs of the subprime crisis behind them.

This convergent disruption— tougher regulations, traditional and nontraditional competitors, and digitization— is leading to a structural change in the industry and creating an increasingly complex and highly dynamic future environment for lenders to navigate.


To avoid being marginalized in this complex and dynamic environment, traditional lenders must become agile and innovative, adjusting to industry changes and defining the industry’s future.

They must also take advantage of three building blocks to achieve a competitive advantage:

  • Optimization and simplification. Today’s table stakes, and the essential foundation for 2020— lenders will require this building block just to survive.

  • Agility. The new table stakes for 2020— lenders using this building block will do more than survive, they will succeed.

  • Continuous innovation. Separating the leaders in 2020— lenders using this building block will be the high performers.

While new business models— emerging digital lenders, digital hybrids and retail correspondents— have the potential to be highly disruptive to the banking industry, traditional full-service providers can also be successful by transforming themselves to become:

  • More digital.The focus will be on rate shopping and consumer finance education.

  • Truly customer-driven. All decisions will be made to satisfy customer needs.

  • Omnichannel. More than half of all business will be conducted through digital channels, although physical channels will still play a very important part.

  • Innovative at the core. Innovation will be embedded in all levels of the organization to help it stay ahead of the market.

  • Partnered with leaders in other industries. Opportunities will continue to exist for lenders to partner with companies in other industries.

  • Large-scale. Products will be delivered to the mass market at lower margins.


The stakes will be much higher in 2020 no matter which business model is pursued.

The choice of business model need not be a “one-size-fits-all” decision— different business models can be adopted for different business units, and each business model can deploy innovative go-to-market strategies to further increase returns.

However, to achieve a sustainable competitive advantage by 2020, lenders must start developing a roadmap today to:

  • Shift from a product-oriented organization, to a customer-driven organization

  • Rebuild bank reputations

  • Embrace and integrate new technologies, channels and strategies

  • Invest in initiatives that will proactively build the business—rather than reactively respond to regulations, competitors and industry changes

Industry & topics highlighted

Financial Services